• By definition, marketing is the field of management devoted to selling. It is the link between production and profit, providing the expertise for taking a product or service through the most appropriate channels to find the people most likely to buy it. To fulfil this goal, it is crucial to become adept at understanding the market. This means closely studying the behavior and lifestyle of the customer so that a product or service can be developed to be irresistible in every way, from the purpose, function, quality, and look of it, to the speed at which it is delivered, the places it is sold, its price, and the level of customer service support offered. That is the theory. In practice, making your customers love you by always putting them first and fulfilling their needs and desires is the biggest challenge of marketing.

Case study: Ratners: An example of a serious failure to prioritize the customer is that of the British jewelry company, Ratners. By the late 1980s, Ratners was the world’s biggest jeweler, with 2,000 stores on two continents. The stores sold jewelry at low prices and were very popular—until the disastrous speech by the company’s chief executive, Gerald Ratner, at the Institute of Directors in 1991. In his talk, supposedly about the company’s success, he instead insulted one of his own products, joking that its low price was possible due to its poor quality. Offended customers abandoned the store and $800 (Ł500) million was wiped off the value of the company, which nearly went under. This notorious example shows how businesses who treat customers with contempt can pay a very high price.

• Collecting data about the purchase history of customers is a starting point. Combined with analyzing any available demographic and lifestyle statistics, such data can be used to build a marketing model— essentially a mathematical formula that indicates potential purchase rates for a given set of variables. Naturally there are dangers inherent in trying to predict the future using this type of forecasting. The marketer must also be aware of changing tastes, technology, politics, and economic conditions, so that the business can adapt quickly, avoiding what management scholar Theodore Levitt famously called “marketing myopia.” For example, as consumers have become increasingly reliant on mobile phones and tablets, businesses with foresight have developed mobile-commerce channels and reaped the benefits. In the quest to anticipate customer needs and wants, some of the most progressive companies gather data and examine it on a daily basis so that key elements of the “marketing mix”—such as the product or service itself, the places where it is sold, its price, and any promotional offers—can be adjusted accordingly. Japanese camera company Konica Minolta, for example, uses specialized technology to monitor sales data, competitor activity, and market trends in real time so that it can respond effectively.

Case study: The origin of marketing models: Models of consumer behavior date from the 1960s. They grew out of a need to make marketing more scientific and less driven by instinct or unproven ideas. In the 1960s US scholar Robert Ferber advocated the use of mathematical simulation techniques and models. These became known as measurement models because they were devised to measure demand for a product as a function of various independent variables— for example, if the selling price is raised by one percent how might this affect demand? Then in 1969 Stanford University’s Frank Bass devised his Bass model, which is still used to predict how fast new products will be adopted and spread through a market. Decision Support Systems (DSS) use measurement models to project the outcome of new decisions, adding variables— such as previous outcomes in similar contexts—to help marketers make optimal choices.

Case study: The automobile industry: On the surface, the US auto industry appeared unstoppable. By 1960 the “Big Three” in the city of Detroit (General Motors, Ford, and Chrysler) dominated the domestic and global markets. They produced 93 percent of the automobiles sold in the US, and controlled 48 percent of world sales. One-sixth of the US work force was employed directly or indirectly by the industry. Nevertheless, cracks were beginning to show. In 1955, the Big Three had enjoyed a record year. However, demand fell dramatically in 1956 and 1957 because so many consumers had already bought cars. This sales slump was partly responsible for the recession of 1958, during which manufacturing as a whole declined. This was the first economic downturn in the US since the Great Depression. Meanwhile, car manufacturers in Germany, the UK, France, and Japan were threatening the dominance of the Big Three. “Detroit never really researched the customer’s wants,” alleged Levitt. “It only researched the kinds of things which it had already decided to offer.” By the time US carmakers realized what had happened, they found it difficult to adjust. After a series of dud models and marketing failures, they finally rebounded in 1965 with the ubiquitous “muscle” cars such as the Ford Mustang—but they would never again have such an iron grip on the market. Before Theodore Levitt’s groundbreaking article in 1960, marketing was not considered a serious endeavor worthy of management attention; instead it was a formulaic task left to the sales or production departments. But “Marketing Myopia” prompted both the corporate and academic worlds to start thinking differently.

Case study: Android Inc.: In 2005, Google purchased a little-known company called Android Inc., which was developing a smartphone platform. Two years later Apple released its iPhone and rapidly dominated the market; customers loved it since they could replicate the world of the Internet on a handheld device. Online search giant, Google, saw that it risked becoming beholden to Apple for access to sell its applications so, with other cell-phone makers, it developed an alternative—an opensource operating system that would work on all mobile devices. Google now had a platform through which it could generate profit with sales of applications and in-app advertising. Kotler cites Google as a model of innovation, always seeking new ways to solve customers’ problems and help them manage vast amounts of information. Levitt would have agreed with the first line of Google’s corporate philosophy: “Focus on the user and all else will follow.”

• Secondary data: how do marketers identify the need for new products? How do they decide how to improve existing products? One very important way is by collecting data using market research. The easiest data to collect is information that is already available (= secondary data). This may be internal company data such as the company’s sales figures broken down according to different categories (customers, product lines, territories, etc.). Alternatively, it may be external data found in published sources such as reports from government agencies, trade associations and professional research firms. Another important source of secondary data is simply to look at consumer buying patterns in more developed markets where the product is already available.
• Primary data: data collected for the first time (= primary data) is more difficult and expensive to obtain, but will give answers to the exact questions that marketers are interested in. It includes both quantitative information (e.g. carrying out a survey on a representative sample of people using a questionnaire) and qualitative information (through focus groups, face-to-face interviews, etc.). Another important source of primary data is looking at the activity of competitors (= benchmarking), and this may include looking at their product range or their marketing strategy.
• Etnography: A new area of research is ethnography: studying people’s behaviour in natural environments. Of all the techniques above, focus groups in particular can give very valuable information. A small group of consumers sit in a room and discuss a variety of pre-defined topics. They might be asked how they feel about a particular brand, which of various possible new advertising campaigns they prefer, what ideas they have for improving an existing product, etc. The interview is usually recorded for later analysis.
• Research methodology:
  • Focus groups: small groups from the target group plus one moderator to mediate or run the session. The moderator prepares questions for the session.
  • Package test: used to test ideas for new packaging; could be in a focus group.
  • Taste test: used to test what consumers think about new flavours.
  • Home test: consumers try the products at home, in a real situation.
  • A self-administered questionnaire is completed (or filled in) by the respondent, and an interviewer-administered questionnaire is filled in on behalf of the respondent by an interviewer.
  • Telephone surveys are carried out by telephoning the respondent and asking questions.
  • A mail survey is mailed to the respondent, who completes it and posts it back.
  • Online surveys are administered on the internet.
  • Mystery shopping: a person poses as a consumer and checks the level of service and hygiene in a restaurant, hotel or shop.
  • Omnibus surveys: a market research institute carries out (or conducts) research for several companies at the same time. A long survey is given to respondents; some institutes have a panel of existing respondents who are accustomed to answering the surveys.

 Exercise 1: Complete the text!

 Video 1: Investopedia: Market research

Watch the movie and fill in the missing sentences!